Opinion
Civil Action No. 94-2300, Section "K"(4)
June 20, 2000
ORDER AND REASONS
Before the Court are two motions which came for hearing on June 7, 2000. Empire Fire Marine Insurance Company ("Empire") seeks summary judgment on claims made by Texaco Exploration and Production Inc., Texaco Inc., and Texaco Pipeline Company (referred to collectively as "Texaco") based on the lack of coverage under a PI policy issued by Empire. Texaco asserts that it has been wrongfully denied coverage as an additional assured on the instant PI policy issued to Torch, Inc., entitling it to "bad faith" penalties and damages under Louisiana law. Texaco has filed a cross-motion for partial summary judgment seeking judgment finding coverage.
Background
The Incident
The underlying facts of this matter have been set forth in great detail in a number of opinions penned by this Court. See, e.g., In the Matter of Torch. Inc., 1996 WL 185765 (E.D.La. April 16, 1996). This litigation arises from an accident which occurred in the Delta Duck Club Field between Main Pass and Octave Pass of the Mississippi River Delta. On July 6, 1994, Torch, Inc. ("Torch") was laying pipe for Texaco using the spud barge TORCH I when a spud struck a 2 7/8 gas lift line owned by Texaco rupturing a pressurized gas line just as a worker lit his propane torch. As a result, the natural gas ignited causing an explosion and fire; that worker was killed and a number of other members of the crew were injured.
The Master Work Agreement
Torch Designated an Independent Contractor
Torch performed this work pursuant to a Master Work Agreement ("MWA") that was in effect between Torch, Inc. and Texaco which this Court has found to be a maritime contract and which provided Texaco indemnification except for punitive damages. As previously noted by this Court, the MWA in relevant part states:
1(A) Work to be Performed . . . . Contractor agrees to perform the following work: install list, bury and clean pipelines and risers, . . .
1(B) Material, Equipment, and Service to be Provided. Contractor agrees, at its sole cost, to provide all materials, equipment, and services necessary to perform Contractor's obligations except as provided by Paragraph 6.D.
1(D) Contractor Status. Contractor is an independent contractor. As such, Texaco shall have no voice in the discharge, supervision, or control of Contractor's employees or subcontractors or in fixing their number, compensation, or hours of service. Texaco shall not control Contractor's performance, but Texaco shall have the general right to inspect the work and to make suggestions and comments.
7(G) Safety. Contractor shall take all measures necessary to provide safe working conditions and to prevent accidents in connection with the performance of work. Contractor shall have the sole responsibility for the safety of its employees and subcontractors, as well as their performance in accordance with the appropriate safety practices.
Contractor shall conduct the work in a safe and practical manner and in accordance with all applicable governmental laws, orders and regulations, including but not limited to those contained in the Code of Federal Regulations. . .In the Matter of Torch, 1996 WL 512303, *1-2 (E.D.La. Sept. 6, 1996).
Insurance and Waiver of Subrogation Provisions
Another relevant part of the MWA concerns requirements concerning naming Texaco as an additional assured under Torch's policies of insurance. Specifically, the contract in Section 4 concerning "risk allocation, indemnity, force majeure, insurance, pollution control" states in relevant part:
D. Insurance
Contractor, and all of its subcontractors, shall maintain, at their sole cost, at all times while performing work, insurance coverage, . . . and endorsed to cover operations to be performed under this Agreement. A certificate shall be delivered to Texaco immediately upon execution of this Agreement naming Texaco, its subsidiaries and affiliated companies as additional-insured and evidencing the Comprehensive General Liability and Excess Liability coverages specifically quoting the indemnification provision set forth in this Agreement.
(Defendant's Exhibit B to its Memorandum in Support of Motion for Summary Judgment). The contract then delineates all specific types of insurance required under the MWA. At sub-paragraph 6, the contract requires "Protection and Indemnity Insurance and Full Hull Insurance on all vessels and other watercraft owned, chartered or operated by Contractor." The contract continues with the following language:
Each policy shall also be endorsed to provide waiver of subrogation rights in favor of Texaco, its subsidiaries and affiliated companies and all other parties owning an interest in the property on which work covered by this Agreement is to be performed.Id. The contract specifically provides that Torch's failure to keep the required insurance policies in effect would constitute a breach of the MWA.
Previous Litigation and Remaining Claims
At trial on the issue of limitation, Torch was found to be at fault in causing the accident and was denied limitation. Consequently, the personal injury claims went to trial in state court and a large verdict against Texaco was rendered which included punitive damages. It must be noted that save for one personal injury claimant, all suits brought against Texaco where based on its position as pipeline owner. Furthermore, at trial the jury was charged to assess fault against Texaco based solely on its role as the owner and operator of a submerged gas lift line. All of these claims have now been settled, save as to the claim by Texaco as against Empire.
This claim was brought by the Giroir plaintiffs and was apparently brought against Texaco as owner pro hac vice of the TORCH I. To be an owner pro hac vice, the barge would have had to have been bareboat chartered to Texaco which is not the case. Furthermore, the claim as delineated was apparently not pursued as such.
On May 24, 2000, Texaco represented to the Court that it seeks as damages in the subject matter only "attorneys' fees, charges and costs of investigation and defense incurred and paid by the Texaco interests arising out of and related to the July 6, 1994 incident and for all applicable penalties and attorneys' fees for the prosecution of this claim." (See Exhibit 1 attached hereto). Thus, to the extent that Empire seeks to dismiss a claim for coverage for the punitive damages actually awarded in the trial in Civil District Court, such motion is moot as the claim has been withdrawn.
Empire's PI Policy
"As Owner" Provision
With respect to the insurance issues, it is undisputed that Empire issued a policy of marine PI insurance to Torch, Inc. for the 1994 policy year that was in force at the time of the accident. The policy consisted of the standard SP-23 Form for PI insurance supplemented by manuscript "General Protection and Indemnity Conditions" and provided coverage to the assured "in respect of the vessel" scheduled in the policy. Significantly, the policy states:
The Assurer hereby undertakes to make good to the Assured or the Assured's executors, administrators and/or successors, all such loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay and shall pay on account of the liabilities, risks, events and/or happenings herein set forth. . . .
(Empire's Exhibit 1 to Memorandum in Support of Motion for Summary Judgment).
At the limitation trial, this Court focused on the fact that a hazard survey which could have prevented this accident was not performed. The Court stated:
The testimony is unanimous that no one, [Texaco] personnel or Torch personnel, knew the location of the canal crossing of the ruptured line. Indeed, the testimony established that no map or chart exists depicting the location of the instant pipeline. Further, no "hazard survey" to locate all canal crossings was performed by anyone, [Texaco] or Torch, prior to Torch commencing its work. Torch additionally failed to verify that a survey had been done as it failed to request a copy or details of same from [Texaco]. Torch's knowledge that no hazard survey had been completed on July 6, 1994 is underscored by the similar incident which occurred during the laying of the February 1994 line.
Though Torch did not complete a hazard survey nor did Torch verify that TEPI had completed such a survey, Torch decided on the method it would use to lay the instant flow lines including the use of the CHANTEL LYNN and the use of free-falling spuds. The testimony, including that of Alesich, established that free-falling spuds is very common occurrence in this area.
Thus, Texaco's alleged failure to maintain the subject gas lift line, its failure to mark such line on a map, its failure to know whether such a line existed and its failure to do a hazard survey all predated the deployment of the vessel and barge at issue.
Right to Add Additional Assureds
In addition, the policy included language pertaining to contractual requirements to name other parties as additional assureds. That provision states:
3. PRIVILEGE TO ADD ADDITIONAL ASSURES AND LOSS PAYEES
Where required by contract or agreement, privilege is granted the Assured to include hereunder other parties as Additional Assured and/or Loss Payees, provided that the Assured shall have exercised this option prior to loss. The Assured shall report all Additional Assured and Loss Payees to this Company within five working days.
It is the Court's task to now determine whether summary judgment on the issue of the bad faith claims is appropriate.
Standard for Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact." Stults v. Conoco, 76 F.3d 651, 656, (5th Cir. 1996), (citingSkotak v. Tenneco Resins. Inc., 953 F.2d 909, 912-13 (5th Cir. 1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (emphasis supplied); Tubacex. Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). Finally, the court notes that the substantive law determines materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986).
The court now turns to the merits of the arguments with these standards in mind.
Elements of Bad Faith Claim With Respect to Louisiana Insurance Law
Louisiana's insurance "bad faith" statutes with respect to insurer's wrongful practices are found at La. Rev. Stat. § § 22:658 and 22:1220. The first statute found in the Louisiana Insurance Code at La. Rev. Stat. 22:658 provides that all insurers shall pay the amount of any claim due any insured within 30 days after receipt of satisfactory proofs of loss from the insured or any party in interest. La. Rev. Stat. 22:658 (A)(1). Subsection (3) of this statute requires the insurer to initiate loss adjustment of property damage claim or reasonable medical expenses claim within fourteen days after notification of loss by the claimant, where there is no catastrophic loss. Where there is provision subjects the insurer to the penalties provided in La. Rev. Stat. 22:1220. La. Rev. Stat. 22:658(A)(3). As the penalties provided in § 658 are triggered only where an insurer is "arbitrary, capricious or without probable cause" in its failure to pay, this statute is not applicable where there is no coverage for the insured. La. Rev. Stat. 22:658(B).
The other applicable statute is found at La. Rev. Stat. 22:1220 which provides:
A. An insurer, including but not limited to a foreign line and surplus line insurer, owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.
(2) Failing to pay a settlement withing thirty days after an agreement is reduced to writing.
(3) Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of the insured.
(4) Misleading a claimant as to the applicable prescriptive period.
(5) Failing to pay the amount of any claim due any person insured by the contrast within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious or without probable cause.
La. Rev. Stat. 22:1220. This listing of actions that trigger a bad faith claim in subsection (B) has been determined to be exclusive in nature.Theriot v. Midland Risk Ins, 694 So.2d 184, 192 (La. 1997). Again, with respect to this statute, if there is no coverage, the statute is inapplicable.
The burden of proving an insurance "bad faith" claim under these statutes rests with the claimant. Strong v. Farm Bureau Ins. Co., 743 So.2d 949, 953 (La.App. 2nd Cir. 1999); Wiley v. Safeway Ins. Co., 745 So.2d 636, 640 (La.App. 3d Cir. 1999). Because of the penal nature of the statutes, they are strictly construed and should not be invoked when the insurer has a reasonable basis for denying coverage. Hanover Corp. of America v. State Farm Mut. Automobile Ins. Co., 67 F.3d 70, 73 (5th Cir. 1995), citing Real Asset Management. Inc. v. Lloyd's of London, 61 F.3d 1223, 1225-28 (5th Cir. 1995). Accordingly, the Court concurs with Empire's argument that in order for Texaco to prevail, Texaco must prove:
1. That the MWA obligated Torch to name Texaco as an additional insured under the Empire PI policy;
2. That Texaco in fact was named as an additional insured under the Empire PI policy;
3. That Texaco's losses arising from the July 1994 casualty are covered under the Empire PI policy;
4. That Empire lacked any good faith basis for denying coverage, and acted instead in an "arbitrary and capricious" manner; and
5. That Empire's action caused Texaco's alleged damages (in other words, the state court jury found Texaco negligent and guilty of "willful and wanton misconduct" because of the acts of Empire.)
(Empire's Memorandum in Support of Motion for Summary Judgment, p. 10). For the reasons that follow, the Court finds that while the MWA obligated Torch to name Texaco as an additional assured and that Texaco was in fact named as an additional assured, Texaco is not covered by the policy as it did not fulfill the "as owner" requirements of the policy. Thus, the analysis that follows will only cover the first three elements delineated above.
MWA Required Naming Texaco
With respect to whether the MWA required Torch to name Texaco as an additional assured, the Court finds that the plain language of the MWA does obligate Torch to name Texaco as an additional assured. It is clear from the provisions cited above that Texaco required Torch under the contract to name it as an additional assured under all policies required to be obtained, and this contract required Torch to obtain PI coverage which Torch did.
Texaco is an Additional Assured under the Empire Policy
As to whether Texaco was in fact an additional insured, the answer is not quite so clear. The Court must analyze the relevant Empire insurance policy. Although marine insurance is considered a maritime contract, the interpretation of a contract of marine insurance is-in the absence of a specific and controlling federal rule-to be determined by reference to appropriate state law. Ingersoll-Rand Financial Corp. v. Employers Ins. of Wausau, 771 F.2d 910, 911-12 (5th Cir. 1985), citing Wilbun Boat Co. v. Firemen's Fund Ins. Co., 348 U.S. 310, 312-16 (1955). Thus, where federal maritime law is silent, the Court will look to Louisiana law. Under Louisiana law, an insurance contract must "be construed according to the entirety of its terms and conditions as set forth in the policy, and as amplified, extended or modified by any rider, endorsement, or application attached to or made a part of the policy." La. Rev. Stat. Ann. § 22:654 (West 1995). In addition, an insurance policy should be construed by using the general rules of interpretation of contract set forth in the Civil Code." Louisiana Insurance Guaranty Ass'n v. Interstate Fire Cas. Co., 630 So.2d 759, 763 (La. 1994).
In order to determine whether Texaco is an additional assured under the Empire policy, the Court must interpret the following language as previously set forth:
3. PRIVILEGE TO ADD ADDITIONAL ASSURES AND LOSS PAYEES
Where required by contract or agreement, privilege is granted the Assured to include hereunder other parties as Additional Assureds and/or Loss Payees, provided that the Assured shall have exercised this option prior to loss. The Assured shall report all Additional Assureds and Loss Payees to this Company within five working days.
(Defendant's Exhibit A). Empire argues that this language does not provide that:
the naming of an additional assured is an automatic event where required by contract. To opposite effect, the clause states that where Torch is contractually obligated to name a third-party as an additional insured, Torch thereby acquires the "option" to name that party, "provided" the option is "exercised" prior to the loss.
(Memorandum in Opposition to Texaco's Motion at 10). However, this interpretation disregards a line of cases interpreting similar provisions which holds that this kind of policy language acts to make a party such as Texaco an additional insured without condition.
In Elf Exploration. Inc. v. Cameron Offshore Boats. Inc., 863 F. Supp. 386 (E.D.Tx. 1994), Elf sued Cameron for breach of a contract to procure insurance. Cameron argued and the court found that the following language operated automatically to provide coverage to Elf as an additional assured:
If required in the ordinary course of their business, permission is hereby granted the assured to name Additional Assureds and waive underwriters' rights of subrogation provided such naming or waiver takes place prior to any accident or occurrence giving rise to a claim thereunder.Id. at 391. That court reasoned that the language "if required in the ordinary course of their business" operated to automatically include Elf as an additional assured under Cameron's insurance contract. Id. at 392.
In reaching this conclusion the Elf court relied on Clark v. B D Inspection Serv., 896 F.2d 105, 106 (5th Cir. 1990) in which the Fifth Circuit interpreted the following clause: "This policy includes as an additional insured, any person or organization when required to be so named but only as respect operations of the named insured." The appellate court found that such language necessitated that once there was a contractual requirement between the assured and the party sought to be made an additional assured, the language of the policy required no more for the third party to be considered an additional assured.
The Elf court also relied on Rebstock v. Sonat Offshore Drilling, Inc., No. 90-3902, 1991 WL 255401 (E.D.La. Nov. 19, 1991). The clause at issue in Rebstock provided: "It is understood and agreed that, where required, the Assured is granted the privilege to include hereunder other parties as additional assured." The Rebstock court concluded, "LM was required to include Amoco and Sonat in its P I policy; the policy's co-assured clause provides that where required as here, LM may include other parties as additional assureds." Id.
The party in Elf arguing that Cameron had breached its agreement to procure insurance attempted to narrowly construe Clark and Rebstock; however, the Elf court rejected that approach. It stated:
The court does not view these cases so narrowly. Nothing in those opinion suggest that decisions were based on either mutuality of obligation or the particular party asserting that plaintiff is not an additional assured. As in Clark and Rebstock, the omnibus clause inserted in defendant's insurance contract provided for additional assureds if "required in the ordinary course of their business." . . . Thus, no breach of contract occurred, and plaintiffs remedies lie with defendant's insurance carrier.Elf 863 F. Supp. 392. Likewise, this Court finds that the subject policy provision operates to make Texaco an additional insured under the Empire policy. See also T.J. King v. Employers National Ins. Co., 928 F.2d 1438, 1445 (5th Cir. 1991).
The PI Policy Does Not Provide Coverage as the MWA Does Not Constitute a Time Charter
As the Court has found that Texaco is an additional assured, Texaco's contentions that Empire is precluded from arguing that there is no coverage based on Torch's failure to notify Empire because it did not raise such a defense until recently is rendered moot.
The seminal issue thus becomes whether the Empire policy provides coverage to Texaco. As previously noted, the policy at issue contains the following limitation on coverage:
The Assurer hereby undertakes to make good to the Assured or the Assured's executors, administrators and/or successors, all such loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay and shall pay on account of the liabilities, risks, events and/or happenings herein set forth. . . .
(Defendant's Exhibit A). Thus, coverage under this policy "extends only to liability an insured incurs in its capacity as owner, operator or charterer of a vessel named in the policy." Certain Underwriters at Lloyd's v. LM Bo Truc Rental. Inc., 1993 WL 139481, *4 (E.D.La. April 28, 1993) (emphasis added).
It is uncontroverted that Texaco was not the owner or operator of the TORCH I. Texaco now contends that it entered into a time charter when it hired Torch to perform the subject work under the MWA. A review of the MWA belies such a position.
A "charter" is an arrangement whereby one person (the "charterer") becomes entitled to the use of the whole of a vessel belonging to another (the "owner"). Walker v. Braus, 995 F.2d 77, 80-81 (5th Cir. 1993). In a time charter the vessel owner retains possession and control of the vessel; provides whatever crew is needed and is responsible for normal operating expenses. Further, in a time charter, the owner fully equips and maintains the vessel, makes repairs as needed and provides insurance on the vessel. Id. Texaco argues that the MWA fulfills these requirements.
The fallacy with such a position is that the MWA was a contract to perform work that is in this instance the installation of a pipeline. The Texaco contract specifically designated that Torch was to act as an independent contractor, and Texaco had no "voice in the discharge, supervision or control over Torch's employees." Torch was to provide all equipment and services necessary to complete such a task. It was Torch's responsibility to "take all measures necessary to provide safe working conditions and to prevent accidents in connection with the performance of work. Contractor shall have the sole responsibility for the safety of its employees and subcontractors, as well as their performance in accordance with the appropriate safety practices." See MWA cited above.
Furthermore, the addendum to the MWA which Texaco contends creates the necessary time charter consists of a list of equipment that also includes such things as 2 generators, belts cranes, telephone communication systems, and spuds. Certainly, Texaco did not intend to lease all of this equipment; rather, this list constitutes a list of equipment for which Texaco would pay a specific hourly rate when Torch utilized such equipment in the execution of the specific work order acting as an independent contractor
Although the Court is aware that a time charter agreement does not have to have a specific form or specific language, Agrico Chem. Co. v. M/V BEN W. MARTIN, 664 F.2d 85 (5th Cir. 1981), there are certain elements that are typical of a time charter agreement. Thirteen distinctive clauses are generally found in a time charter. T. Schoenbaum, Admiralty and Maritime Law at § 11-5 (1994). Virtually none of these elements are present in the master work agreement. Moreover, the Court has reviewed a typical time charter agreement as reproduced in A. Parks, Law of Tug. Tow. and Pilotage, (3rd ed. 1994) at 1165-71. As noted by counsel of Empire, this agreement bears no resemblance to the MWA. Finally, neither has one case has been cited nor has the Court independently found a case wherein a Master Work Agreement such as the instant one has been construed as a time charterer.
These are (1) the ship and its description, (2) cargo capacity and equipment, (3) speed and bunkers consumption, (4) seaworthiness, (5) period of the charter, (6) payment of hire, (7) lien clause, (8) delivery and redelivery of the vessel, (9) area of trade and cargo options, (10) liability for damage to cargo, (11) division of responsibility, (12) performance of the individual voyage, and (13) employment and agency.
Thus, the Court finds that a reasonable person could not find that it was the intent of the parties for the MWA to constitute a time charter. Texaco's argument belies the position that Texaco has taken throughout the course of this litigation. Should Texaco's position be accepted, the result would be the transmogriflcation of all such agreements into time charters which this Court finds was never the intent of Texaco and which could establish a bizarre precedent. As such, the Court finds that the instant PI policy does not provide coverage to Texaco "as owner" of the TORCH I and Empire cannot be held liable for costs, expenses and attorneys' fees Texaco expended in the litigation of this matter.
Texaco's Liability Did Not Arise "As Owner" of the TORCH I
In addition, even if the Court were to find that the provisions of MWA constituted a time charter and it would be construed "as owner" of the TORCH I, there still would be no coverage provided under this policy. Texaco's liability was not caused by its alleged position "as owner" of the vessel. Rather, its liability arises as owner of the pipeline which exploded. Where a protection and indemnity policy contains language which limits liability "as owner" of a vessel, there must be "some causal operational relation between the vessel and the resulting injury" for coverage to arise. Lanasse v. Travelers Ins. Co., 450 F.2d 580, 584 (5th Cir. 1971). In Lanasse, Chevron sought insurance coverage "as owner" of the vessel on which the victim was injured by the negligence of Chevron's crane operator, with the crane being located on a fixed platform owned by Chevron.
Texaco relies on Randall v. Chevron U.S.A., 13 F.3d 888 (5th Cir. 1994), mod. on other ground, 22 F.3d 568 (5th Cir. 1994); cert. denied sub nom, 513 U.S. 994 (1994) and Helaire v. Mobil Oil Co., 709 F.2d 1031, 1942 (5th Cir. 1981) for the proposition that where an insured vessel is actively involved in the accident and its operations have a causal relation to the accident, the PI policy must respond and the "as owners" limitation is not a basis for denying coverage. These cases are readily distinguishable as each concerns accidents caused by the oil company ordering a vessel out in rough seas. Texaco contends that the applicability here is that Texaco allowed the TORCH I to proceed while knowing that no hazard survey had been done.
This analysis fails. As previously noted, Texaco's alleged failure to maintain the gas lift line, its failure to mark such line on a map, its failure to know whether such a line existed and its failure to do a hazard survey all predated the deployment of the vessel and barge at issue, and were acts of omission related to Texaco's position as operator of the field not as owner of the vessel. Furthermore, at trial in civil district court, Texaco's negligence was assessed solely as the owner of the pipeline. (See Exhibit B to Empire's Memorandum in Opposition to Texaco's Motion for Partial Summary Judgment, pp. 3846-47 of Trial Transcript.). Thus, even if Texaco were considered to have been an "owner" of the TORCH as its time charterer, because Texaco's negligence had nothing to do with the vessel, again coverage would not be provided under the Empire PI policy. As such, Empire cannot owe Texaco reimbursement for costs, expenses and attorney's fees.
Texaco's Position as "Additional Assured" Without Coverage Does Not Create a Cause of Action for Good Faith and Fair Dealing Where There is No Coverage
In its initial brief supporting its motion for partial summary judgment, Texaco reiterates that under Clause 14 of the Empire policy, Texaco is owed costs, expenses and attorneys' fees expended in defense of the covered claim. As the Court has found that Texaco's claims are not covered, this argument fails. However, in its Reply Memorandum, Texaco has argued that even if the "as owner" language precludes coverage under the facts of this case, Texaco is "still an assured" and thus is still owed a duty of good faith and fair dealing under the statutes. For this proposition, it cites the Court to two cases, the previously mentionedLanasse v. Travelers. Ins. Co., 450 F.2d 580 (5th Cir. 1971) and West of England Ship Owners Mut. PI Assoc. v. Shell Offshore. Inc., 1994 WL 500952 (E.D.La. 1994).
Neither case supports such a reading. They do not interpret the Louisiana good faith and fair dealing insurance provisions. These cases focus on whether an insurer can sue to recover from its owned insured or an additional assured moneys paid for a risk covered by the policy. As stated by Judge McNamara in West of England:
The Fifth Circuit has adopted the fundamental principle of insurance law which states that an insurer may not sue its own insured to recover under the insurance policy, nor may an insurer, by way of subrogation, recover from an insured or an additional assured any part of its payment for a risk covered by the policy. [citations omitted] Recovery from an additional assured is barred even if the insurance would not have protected the additional assured with respect to liability arising out of the activity in which he was engaged . . . but would have insured against the type of risk that occurred. [citations omitted]. . . .
This result is fortified by the waiver of subrogation provision in the policy, although the naming of Shell as an additional assured is sufficient. The waiver of subrogation may bar recovery from an additional assured even for non-covered claims. In Lanasse v. Travelers Insurance Company, 450 F.2d 580 (5th Cir. 1971), Chevron was named as an additional assured on a Travelers Insurance Company policy. However, due to the wording of the additional insurance clause and the source of the plaintiff's injury, there was no coverage afforded Chevron under the policy for the loss. In dicta, the court noted that notwithstanding the lack of coverage for the particular loss, the underwriters would be barred from recouping from Chevron sums paid to the plaintiff in light of the explicit policy provision waiving subrogation.Id, at *2-3. Certainly, that is the law of this circuit; however, Empire has not brought suit to recover against Texaco here. These cases do not create a cause of action independent of the insurance statutes, and as such, the Court finds the argument of Texaco to be without merit. Accordingly,
IT IS ORDERED that the Motion for Summary Judgment of Empire is GRANTED and the Motion for Partial Summary Judgment is GRANTED in so far as Texaco is an additional assured under the Empire policy but DENIED in that there is no coverage provided for the reasons set forth herein.